The Ledger
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Polovets: Evaluating startup technology and CTOs at seed is a waste
“I spent most of my time trying to figure out how good is the technology, how good is the CTO. And it took me a few months to realize that that was probably just a waste of time for everybody.”
Polovets: Overpaying across a seed portfolio cuts overall fund returns in half
“I do believe price is important. I think everybody talks about if you invest in Uber, then the seed price doesn't matter. And I think if you invest in Uber, that's true. The seed price doesn't matter. But I think the challenge is that most investors think most…”
Polovets: Fund returns depend far more on initial seed checks than follow-ons
“Yeah, you know, I do believe, actually, that you make most of your money on the right initial bets, And the key is just to make those bets meaningful and trying to double down later helps, but I really think it's secondary.”
Polovets: Startups fail from lack of product-market fit, not technology
“It's very rare for me to see companies fail because of the technology. It's almost always the product market fit is not there, or the team isn't able to recruit as much as they'd like”
Chad Byers: Susa Ventures Will Permanently Cap Fund Size at $150M
“The end state for us is 125, one hundred and fifty million dollar fund capped at that size, never getting bigger. Focus exclusively at early stage.”
Leo Polovets: Susa Ventures will not abandon struggling portfolio companies
“I strongly disagree with this. The first reason is, and this is actually kind of a personal reason, but, you know, my fund, Sousa Ventures, we talk about the investors and founders in our fund being a little bit like a family, and I know it's kind of corny, bu…”
Leo Polovets: Multi-page pitch emails signal a founder lacks clarity
“I think there's a sync that shows that you know how to pitch your product well, and you have a really good grasp of it. And if you need three pages, I think that means that you still aren't sure exactly how to do that. And you don't know how to engage, you kno…”
Polovets: Helpful seed investors usually get follow-on investment access
“And I will also say, I think following on is not a fantasy in my experience. I think if you're helpful and you work hard and founders enjoy working with you, they'll usually give you a chance to follow on, you know, not always, but usually.”
Polovets: Deal picking matters more than deal access for venture returns
“I definitely think picking is more important, you know, because if you don't pick well, then it doesn't really matter if you get in or not, like you're not going to have a good portfolio, but if you can pick well, then access may or may not be important. And I…”
Susa Ventures Seeded Fund I With Marked-Up Angel Deals at Cost
“One of the things we did when we raised the first fund, I think that helped in a tremendous way, is we pulled some of our angel investments into FundOne at cost. So we took some investments we had made the year before, put them in the fund at cost, even though…”
Susa Ventures tolerates 10-20% seed valuation premiums but reevaluates at 70%+
“We're not religious about it. I think if we're off by 10 or 20%, it's not a big deal. But if it feels like the price is off by 70% or 200%, then we really evaluate, like, how much we actually want to invest in a company.”
Polovets: Constructive rejection feedback builds long-term founder relationships
“And in my experience, it's best to send a thoughtful pass rather than disappear, and if you give constructive feedback about what you like about somebody's pitching company, and where are your hesitations, or where you see the risks, and you can give that feed…”
Polovets: Founders must plan for moats starting on day one
“I really think it's important to think about moats from day one, and you might not actually develop a good moat until year two or year five or even year 10, but I think it's at least important to think about, you know, whether you could build a moat over time …”
Polovets: Hard work and domain expertise are not sustainable moats
“And the truth is like, those are nice things to have and they'll help you get a headstart for a couple of months or maybe a year or two, but those are not sustainable competitive advantages. Like you can't outwork every company in the world forever.”
Polovets: Susa walks away when founder valuations double internal targets
“If I was thinking this should be a six million dollar pre and they said they're raising a twelve million dollar pre, that's usually when either I'll walk away or we'll try to have a negotiation and then see if we could make something work out.”
Polovets: Flexport was Susa's only deal decided in the first pitch meeting
“At SUSE, we've made about 50 investments over the last four years. And Flexport was the only one where we made it, like, we basically made the call during the first meeting where we just said, okay, like, we want to be a part of this.”
Polovets: 80% of his seed role is helping founders raise follow-on rounds
“Yes, I think it's probably 80% of how I view my role, in the sense that, you know, the ultimate goal is to help a founder build a huge company, and a lot of times the next milestone to get there is to figure out what you have to prove and prove it so you could…”
Susa Ventures Raised $50M for Fund II After Targeting $40M
“We were targeting forty million. All the existings came in for about 30 of that. We landed one of the big institutions I'd kept warm for three and a half years. They kind of anchored the fund with ten million. And then We went up to the hard cap relatively qui…”
Chad Byers: Institutional LPs Rarely Back First-Time Venture Funds
“So when you start talking about fund to funds or endowments or institutions, they typically aren't funding first, first funds, unless there's a rare circumstance with the GP.”
Chad Byers: Susa Ventures Avoids Investing Based on Brand Defensibility
“I think in our opinion, we'd rather see one of those other three than just a strong brand. So I think, you know, a good example of this is in the commerce space. There's some companies I think where their most defensible aspect is brand. There's examples of ma…”
Chad Byers: The best modern moats rely on data and network effects
“So we strongly believe that for businesses to create long-term value today, you have to have some form of strong defensibility or moat. And we think the best moats today are built with data network effects or economies of scale.”
Chad Byers: Institutional LPs Reject First-Time Distributed Venture Teams
“At the time we were in LA, SF and New York, literally the team was distributed. Most big institutions, that was an immediate no. Felt the team had to be in the same place.”
Susa Ventures Limits Portfolio Companies to 6-8 Per Partner
“And so we'll always maintain in a really low partner to company ratio, ideally long-term kind of six to eight companies per partner, which is very unique at seed because we want to be so operationally involved.”
Robinhood Scaled to a $50M Series B in 18 Months
“What we learned in fund one, which is really important to inform what we did in fund two was that these companies that grow really quickly for us, it was companies like Robin hood where we invested at seed and a year and a half later they had raised a fifty mi…”
Chad Byers: Susa Ventures Aims to Lead Every Deal Within 10 Years
“You know, essentially becoming moving from a follow on fund and hopefully, you know, 10 years from now being the investor of record in every deal, right?”
Susa Ventures' Anchor LP Reference-Checked 30 of 40 Portfolio Founders
“The proof for us in that was our anchor LP and fund two called probably 30 of our 40 portfolio company founders and just said, is Sousa helpful?”
Susa Ventures Doubled Check Size to $500K in Fund II
“So our check size and fund one was 25, 250 K in this fund is 500 K.”
Susa Ventures Fund I Maintained a 1:1 Reserve Ratio
“So in fund one, just to give you a benchmark, we were about a one-to-one in terms of upfront to follow-on capital in terms of the ratio.”